Labor & Employment Law Daily Wrap Up, WHISTLEBLOWERS—S.D. Cal.: Court sustains part of scientist’s whistleblower claim against Paradigm Biopharmaceuticals, (Aug 3, 2026)

By Patricia K. Ruiz, J.D.

The employee plausibly alleged protected disclosures about drug toxicity, the court found.

A federal court in California allowed a former pharmaceutical executive to proceed with part of his whistleblower retaliation claim against Paradigm Biopharmaceuticals (USA), Inc., finding he adequately alleged that he reasonably believed the company was advancing an unsafe drug in violation of federal law. The court, however, dismissed a separate whistleblower theory based on refusal to participate in unlawful conduct, concluding the complaint still failed to identify any specific request that the plaintiff refused. The court also dismissed with prejudice a claim alleging violations of California Labor Code Section 204, holding that the statute does not provide a standalone private right of action (Lapchak v. Paradigm Biopharmaceuticals, No. 3:24-cv-00143-JLS-DDL (S.D. Cal. July 24, 2026)).

Background. Plaintiff Paul A. Lapchak, a pharmacologist who served as Paradigm’s Global Head of Translational Development, alleged that he was hired in October 2022 under an employment agreement that included compensation and company shares. According to the third amended complaint, Lapchak raised concerns in October and November 2023 about toxicity associated with Paradigm’s osteoarthritis drug candidate, Zilosul, and also complained about allegedly unpaid shares, 401(k) contributions and changes to paid time off. He alleged that Paradigm disabled his access to company computer systems in November 2023 and formally terminated him in January 2024.

The motion before the court challenged the complaint’s whistleblower claim under California Labor Code Sections 1102.5(b) and (c) and a claim under California Labor Code Section 204 for untimely payment of wages.

Whistleblower claim. The court denied the motion to dismiss the Section 1102.5(b) claim, finding that Lapchak had cured deficiencies identified in an earlier order. Previously, the court had found that references to the federal Food, Drug, and Cosmetic Act were too general. In the third amended complaint, however, Lapchak identified specific provisions, including 21 U.S.C. §§ 355(a), 355(b)(1)(A)(i), and 355(e), and alleged that Zilosul was a “new drug” that could not safely be administered at a dose sufficient for its intended use. The court concluded those allegations were specific enough at the pleading stage to identify the federal statutory provisions he believed were implicated.

The court rejected Paradigm’s argument that the complaint failed to allege an actual violation of federal law, emphasizing that Section 1102.5(b) requires only a plausible allegation that the employee reasonably believed a violation or noncompliance existed. The court found Lapchak had plausibly alleged such a belief, citing his assertions regarding toxicity concerns and allegations that Paradigm personnel described the findings as “concerning” and required additional presentations regarding the data.

Causation allegations. The court concluded that the third amended complaint sufficiently alleged a causal link between protected activity and adverse employment actions. According to the complaint, Lapchak reported toxicity concerns by email to several named Paradigm executives and employees in October 2023, discussed those concerns during a companywide meeting on Nov. 1, 2023, and made a presentation to company personnel on Nov. 17, 2023. He also alleged that Paradigm’s chief financial officer acknowledged receiving his compensation-related complaints.

Although the complaint did not identify the specific individual responsible for disabling his computer access or terminating his employment, the court held that, at the pleading stage, knowledge of supervisors and managerial employees could be imputed to the employer. The court further found that the alleged timing supported causation because Lapchak claimed his system access was disabled on the same day as a toxicity presentation and that he was terminated roughly two months later.

Section 1102.5(c) theory. The court reached a different conclusion regarding Lapchak’s claim under California Labor Code Section 1102.5(c), which prohibits retaliation against employees who refuse to participate in conduct that would violate the law. While Lapchak argued that Paradigm effectively asked him to continue drug trials involving an allegedly unsafe product, the court found the complaint still lacked allegations identifying who asked him to engage in unlawful conduct or when and how he affirmatively refused. The court said that complaints and reports regarding suspected unlawful activity, standing alone, do not establish a refusal to participate in unlawful conduct. Because the pleading deficiencies might still be curable, the court dismissed the Section 1102.5(c) claim without prejudice and granted leave to amend. The court cautioned that failure to cure the deficiencies could result in dismissal with prejudice.

Labor Code Section 204 claim. The court dismissed with prejudice Lapchak’s claim alleging a violation of California Labor Code Section 204. The court held that Section 204 establishes timing requirements for wage payments but does not create a standalone private right of action. Instead, the statute’s enforcement mechanism is found elsewhere in the Labor Code. As a result, the court concluded that a claim pleaded directly under Section 204 is not legally cognizable.

The court declined to address Paradigm’s alternative arguments concerning whether the alleged unpaid shares, 401(k) contributions and paid-time-off benefits constituted wages because the absence of a private right of action was dispositive. Finding that no additional facts could create such a right under Section 204, the court dismissed the claim with prejudice and without leave to amend.

Disposition. The court granted in part and denied in part Paradigm’s motion to dismiss. It allowed the Section 1102.5(b) whistleblower claim to proceed, dismissed the Section 1102.5(c) claim without prejudice and with leave to amend, and dismissed the Section 204 claim with prejudice and without leave to amend. The court directed Lapchak within 21 days either to file an amended complaint or notify the court that he would not amend.

The case is No. 3:24-cv-00143-JLS-DDL.

Judge: Sammartino, J.

Attorneys: Beatrice Skye Resendes (The Watkins Firm, APC) for Paul A. Lapchak. Daniel Lopez Gonzalez (Littler Mendelson P.C.) and Evan E. Kroll (McDermott Will & Schulte) for Paradigm Biopharmaceuticals [USA], Inc.

Companies: Paradigm Biopharmaceuticals (USA), Inc.

Cases: Whistleblowers Retaliation Discharge ContractClaims StateLawClaims CaliforniaNews